Quick Tips on Building Credit as a Student

What’s a Credit Score? Why Does it Matter?

A credit score is a number ranging from 300 – 850. Credit scores are meant to help companies predict your credit behavior – think of it like a grade. The higher your score, the more likely it is that a company offers you a mortgage, credit card, auto loan, etc. with a lower interest rate (which means you’ll be paying them back less money over time).

Landlords and rental companies can also ask for your credit score as part of your application to rent an apartment, room, or other property.

Maybe none of these things apply to you (yet!), but it doesn’t hurt to get started on building your credit score early if you can!

Build Your Credit History Early

One of the factors that makes up part of your credit score is your credit history. Companies want to know that you’re able to borrow responsibly and that you have a demonstrated history of it.

The earlier you can start building your history, the better time you’ll have with it going forward.

Ask to be an Authorized User on a Credit Card

One way you can start building your credit history early is to be listed as an authorized user on someone else’s credit card, such as your parent or guardian’s.

It’s important to note that not all credit card companies report on authorized users to the credit bureau. If this is the case, being an authorized user won’t have any impact on your credit report or history.

If you’re also planning on using the credit card you’re an authorized user for, make sure to spend responsibly and pay off your balance on time and preferably in full.

Borrow Responsibly with a Secured Card or Student Card

If you’re worried about the possibility of overspending, look into getting a secured card or a student credit card.

A secured card requires a deposit with a bank which serves as your collateral. The credit limit on your card is usually equal to or slightly less than the money on your deposit.

You usually don’t need a cosigner for secured cards, and some companies allow you to upgrade to an unsecured or normal credit card in the future.

A student credit card doesn’t require a deposit, but it does require either evidence of regular income, or a cosigner. You also have to be enrolled at least part time in qualifying schools.

Credit limits for student credit cards are deliberately kept low to prevent new borrowers from getting into too much debt.

Both of these cards are good starting options for starting to build your credit history.

Pay Statements and Loans on Time

Another factor that impacts your credit score is your payment history. Do you reliably make payments on time every month? Then your score will be higher.

Are you significantly late on a regular basis? This could have a negative impact on your credit score.

The same goes for any student loans or other loans you may take out under your name. While most student loans don’t start repayment until after you finish your degree or are otherwise no longer enrolled as a student, make sure you take a look at the terms of your loan.

Be Smart and Keep an Eye on Your Credit Score

As you embark on your credit journey, make sure to check in on your credit score. The major credit reporting companies like TransUnion and Equifax let you check on your score for free a few times a year.

Some credit card companies also provide a free report every month alongside your statement. There are also tools like CreditKarma that allow you to keep track of your credit score and check in on different factors that are having an impact on your score.

Getting in the habit of watching your score will make it easy to see when you might need to watch your spending. Some tools also let you catch any suspicious activity before it gets out of hand.